World economic powers look to stop another crisis-Problems in America may
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“Rapid implementation” of the plan “will not only enhance the resilience of the global financial system for the longer term but should help to support confidence and improve the functioning of the markets,” the G7 officials said in a joint statement.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke hosted the Group of Seven discussions, where officials embraced a plan that would seek to increase the openness, or transparency, of financial markets and to sharpen regulators’ response to urgent financial problems.
Besides the United States, the other members of the G7 are Japan, Germany, Britain, France, Italy and Canada. Friday’s action preceded the weekend meetings of the 185-nation International Monetary Fund and the World Bank.
Risks to the United States and the global economy have intensified since finance officials from the Group of Seven countries last gathered here in October. Many economists now believe the United States has fallen into a recession and the odds of a worldwide downturn have risen sharply ‘ to one in four ‘ according to the IMF, a global financial firefighting institution.
“The turmoil in global financial markets remains challenging and more protracted than we had anticipated,” the G7 officials said.
In the United States, where credit troubles sprang forth with a vengeance last August and quickly spread financial turmoil worldwide, the damage is sorely felt. Foreclosures have surged to record highs, job losses in the first three months of this year have neared the staggering quarter-million mark and financial companies have racked up billions of dollars in losses. The once mighty Bear Stearns, the fifth-largest investment bank in the United States, crashed, prompting a takeover by JP Morgan in a controversial deal backed by the Fed.
Worldwide financial losses could approach $1 trillion over two years, the IMF said earlier this week.
“Given the significant short-term downside risks, we are taking action,” Paulson said of the G7’s decision to adopt the plan. “There may be more bumps in the road,” he warned.
The G7 officials were meeting at a time when the value of the U.S. dollar was hitting record lows against the euro and has fallen sharply against Japan’s yen.
“There have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,” the G7 statement said, in a departure from previous language. The members pledged to closely monitor the situation and “cooperate as appropriate.”